Legislation is set to see the cryptocurrency sector regulated. Syed Rahman and Gary Orritt assess the latest updates and the implications.

Legislation which has been laid before Parliament is expected to come into force in 2027, which will see cryptocurrencies regulated in a similar way to other financial products.

The Treasury is devising rules that will mean companies in the crypto sector will have to meet a set of standards drawn up by the Financial Conduct Authority (FCA). With the crypto sector having increased in popularity in recent years as both a means of investment and a method of payment, the authorities have recognised the need to give those using it the same level of protection they receive with other financial products (albeit whilst simultaneously recognising that risks will remain).

Now that it is set to take on the task of regulating cryptocurrency, the FCA appears keen to move at speed to achieve this, which is understandable. Whatever the exact nature of the regulation that finally comes into force, it will mean that the FCA has greater power to tackle some of the problems associated with crypto; most notably investment fraud and money laundering.

Standards

There are also likely to be political motivations for the regulation of the crypto sector. The government has stated that the new rules will increase transparency and consumer confidence in cryptocurrency and make it easier to identify suspicious activity and hold to account those responsible for it. It also believes the rules will mean the UK will be helping shape global standards for cryptoassets regulation.

According to the government, the new rules will also play a part in supporting innovation and promoting the UK as a destination of choice for digital asset businesses. The Chancellor, Rachel Reeves, has gone as far as to say that “bringing crypto into the regulatory perimeter is a crucial step in securing the UK’s position as a world-leading financial centre in the digital age’’.

But while many are optimistic that there will be benefits to be had from the regulation of crypto, a note of caution needs to be sounded. When it comes to regulation, it is important that a clear balance is struck between allowing innovation and managing risk; including harm to retail customers. And this balancing act may not be straightforward. Statistics in a research note published alongside the FCA’s papers suggest that many consumers carry out no research prior to investing in cryptoassets. This may partly reflect the fact that in such situations there are fewer sources of reliable information than when investing in traditional investment products.

The FCA has made it clear that generally, and with some exceptions, it wants to approach crypto in a way that is similar to the approach it takes to traditional finance. This is the fundamental challenge the FCA faces. It may be no easy task to produce a means of ticking the innovation and management of risk boxes with a relatively new and evolving asset such as crypto, while also adopting a stance originally devised for far more conventional financial products and services. That said, there are pro-growth measures afoot in traditional finance too, including measures to simplify the FCA Handbook.

Busy

There can be no doubt this means it will be a very busy 2026 for those in the crypto sector. Those operating in it are entering a period of wait and watch to see exactly what is introduced. There will be many more roundtables, and consultation responses – the three latest papers are open until February 2026. But they now need to be putting in the hours of preparation in anticipation of what appears to be the inevitable arrival of regulation. This will come at cost – both direct and indirect.

For some, this may be the first time they have had to consider regulatory compliance obligations. Other firms are already regulated for other services they offer, but this goes much wider. All in all, those who will be subject to the regulation of crypto must now be thinking about what approach to take to ensure they do not fall foul of the rules once they have been introduced.

If they are not sure how to do this, they have to be seeking help from those with the relevant experience and expertise. Regulation is being brought in, at least partly, to rid crypto of the ‘wild west’ reputation it has gained due to the number of bad actors who use it. Those who will be subject to it cannot afford to cut corners when it comes to the responsibilities that are set to be placed on them.

For now, the finer details of the proposed regulation are yet to be known. Following its letter on 9 December 2025 to the Prime Minister on its progression against pro-growth measures (including related to digital assets), the FCA has published the aforementioned series of three consultation papers which seek views on next-step proposals on shaping the UK’s crypto rules. It is imperative that all those who are involved in the crypto sector keep a close eye on what happens next.